We summarize the highlights of the Corporate Sustainability Due Diligence Directive (CSDD), focusing especially on those aspects that affect waste management.
Due diligence is a process that enables companies to identify, prevent, mitigate and account for how they address their actual and potential adverse impacts. In this post we summarize the highlights of the new European directive on corporate sustainability due diligence, focusing especially on those aspects that affect waste management.
The new CSDD or CS3D (Corporate Sustainability Due Diligence Directive or Corporate Sustainability Due Diligence Regulation) is based on:
Several EU member states (including France, the Netherlands and the UK) already have national ESG (Environmental, Social and Corporate Governance criteria) due diligence standards in place. The EU-wide directive aims to harmonize enforcement and civil and criminal liability frameworks, as well as to expand efforts across the bloc.
The approval of this Directive by the European Parliament on June 1 leaves the new regulation one step away from its definitive implementation.
Despite this progress at the EU level, Spanish national regulations have still not progressed since 2022, when the public consultation round was opened.
This proposal aims to impose due diligence with respect to potential or actual adverse impacts on:
Will apply to large EU companies (over 500 employees and €150 million in global turnover) and other high impact companies in specific sectors (over 250 employees and €40 million in global turnover).
The Directive considers the textile (including footwear), agricultural, fishing, food producers, animal, wood, food or beverage traders; extraction, marketing and/or intermediation of minerals (from metals to natural gas); and manufacturers of metal products or other minerals (with the exception of machinery or equipment) to be high impact sectors.
Specifically, the proposed Directive will apply to the following companies:
The Directive will affect the first group of companies with a turnover of more than 150 M € in Europe or European within 2 years after its implementation, and the second group after 4 years (provided that at least 50% of their turnover is produced in identified high impact sectors).
Non-EU companies will also be subject if they meet the above-mentioned thresholds (reaching a specific EU turnover or generating revenues in specific high-risk sectors) and operate in the EU.
Companies from third countries included in the scope must appoint an authorized representative within the EU.
Even if the company falls outside the scope of the EU CSDD, increased pressure to align operations and supply chains with ESG objectives is likely to drive similar legislation in other jurisdictions.
This proposal for a Directive does not propose rules directly applicable to small and medium-sized companies, but it does establish that, in the event that they are suppliers or participate in any way in the supply chain of any eligible company, they must be aligned with the policies of the latter.
In the event that such SMEs do not have their own capacity to comply with the company's policies, the company will be responsible for supporting them to improve their performance.
The proposal provides for specific support to help SMEs to gradually incorporate sustainability aspects into their business activity.
The CSDD considers that for due diligence to have a significant impact, among other measures, it should cover "adverse environmental impacts generated throughout waste management". These adverse impacts occur "in companies' own operations, subsidiaries, products, services and value chains, in particular in the sourcing of raw materials [...] or in the disposal of products or waste".
When "a company sources products containing recycled material, it can be difficult to verify the origin of secondary raw materials." For that reason, "the company should take appropriate steps to trace the secondary raw materials back to the relevant supplier and assess whether adequate information exists to demonstrate that the material is recycled."
Member States shall:
Companies will be required to:
The approval of the Directive will mean for the companies subject to that standard:
Environmental advocates point to loopholes in the new regulations, such as the exemption of some financial institutions and proposed delays in implementation deadlines.
On the other hand, member states and industry representatives have objected to the scale and ambition of the current EU environmental regulatory drive, as well as its timing. Industry groups also cite the potential of the proposed directive to stifle investment and open the floodgates to litigation against companies.